How MLMs get around the whole "Pyramid Scheme Scam" question...
Quote: ^"The key feature is that a pyramid scheme pays its distributors rewards “for recruiting other participants into the program?…?which are unrelated to sale of the product to ultimate users.”
So if an MLM were to pay its distributors, say, $150 for each new recruit it signed up, it would probably be a pyramid scheme. Few MLMs are so foolish as to do that. Instead, they typically pay a distributor—as Herbalife does—based on the products he orders, and on the products ordered by his first three levels of recruits, i.e., his direct recruits, his recruits’ recruits, and his recruits’ recruits’ recruits. (A distributor’s recruits and all their recruiting descendants are referred to collectively as his downline.)
While it’s true, then, that no distributor is paid for recruiting as such, it’s also true that no distributor will ever achieve the upper echelons of an MLM’s compensation scheme, including Herbalife’s, without recruiting.
Further complicating the analysis is another striking feature of virtually all MLMs, including Herbalife. Whereas conventional businesses pay salespeople based on their sales, MLMs pay them based on their purchases (and those of their downlines). While the hope is that the products purchased by distributors eventually find their way to consumers or are consumed by the distributors themselves, it’s hard to be sure that they are."^
This is where MLMbots buy their 'monthly quota' and end up having to store it, unused, at their home.
And this...
Quote "While judges and economists have proposed other definitions, most boil down to this: The more genuine a company’s product, and the more genuine the consumer demand for it, the less likely it is that the company is a pyramid scheme. With a pyramid scheme, the product is little more than a fig leaf camouflaging what is, at its core, an elaborate chain letter."